Many organizations prepare an annual report to highlight successes and lessons learned. These reports build a culture of transparency and continued improvement.
Sustainability reporting is one way organizations add depth to their performance evaluations. This reporting reviews the organization’s performance in the following areas:
Economic—such as smart growth, research and development investment, or cost savings.
Environmental—such as carbon emission, water footprint, or waste reduction.
Social—such as worker health and safety, equal opportunity, or fair trade.
Many organizations now include these metrics in their annual reports, but some report them separately in their corporate social responsibility (CSR) or sustainability reports. CSR reports offer a flexible structure that does not require organizations to report against a set of topics. This framework may exclude what matters most to the organization and the impacts of its operation. Sustainability reports that follow the Global Reporting Initiative, or GRI, have an established framework that furnishes a broad range of topics for organizations to consider and report against.
GRI, an international organization with standardized sustainability reporting, released its first guidelines in 2000. Since then, best practices have changed dramatically. In the past, standards often looked like checklists and graded rating scales. The current standard, GRI G4, encourages organizations to focus on identifying what sustainability issues matter most and where they matter, and then prioritize them through consultations with stakeholders.
How does an organization develop a customized sustainability report?
Step 1—Identify the framework that best fits your organizational needs. Consider and select an approach that best fits your operations and the topics you wish to include in the report. It’s not efficient to reinvent the wheel: customize the selected framework to fit your organization. You may want to look at your competitors to get an idea of which metrics to prioritize on the basis of your industry. Sustainability reporting frameworks vary by industry in style, scope, and content.
Step 2—Define the report scope. Defining the scope (parameters) of the report guides the remainder of the reporting process, which includes many considerations, such as what is achievable, what can be controlled, and what portion of operations will be covered.
Step 3—Engage stakeholders. Often, a sustainability department leads the project because it has wide-ranging knowledge of the organization’s operational impacts. However, experience shows that assessing assumptions with stakeholders—customers, employees, suppliers, or the community at large—is key. You can engage with your stakeholders in many ways, including internal cross-functional team meetings, town halls, interviews, surveys, social media, and community panels or advisory boards.
Step 4—Prioritize metrics and set goals. Analyzing patterns across stakeholders reveals which metrics are most important to measure and address. Some organizations don’t have a large environmental impact, so their reporting is more social and economic in focus. True sustainability reporting should have elements of all three. Once metrics are prioritized, develop goals that focus on reducing your most critical operational impacts.
Step 5—Prepare the report. Even if the first year tackles only a small area, it is the beginning of a long-term process focused on setting realistic and attainable sustainability goals.
What are reasonable ways to start the process?
A challenging part of any reporting process is gaining leadership buy-in. Any strong leadership team appreciates a tool that gives it the pulse of an organization. But, like any new process, it takes time to show the value of this new way of evaluating performance.
When building a sustainability report based on stakeholder engagement, a great way to start is to run a small pilot program with only a few stakeholders or a narrowly defined report scope. In that pilot program, the goal is trust building. It needs to be a safe environment, perhaps a situation where participants do not disclose their names. In the end, the report it generates will build interest so that people understand the value of honest interaction.
Engaging stakeholders without a preconceived notion of what is important is essential. The prioritization of metrics should be based on information gathered in interviews, focus groups, or surveys, not a message defined only by leadership.
Why do organizations invest in sustainability reporting?
- It is required for doing business in some countries. It is the law in some countries for companies to produce sustainability reports. Companies desiring to do business in such countries must consider this.
- Contracts are starting to require it. Although sustainability reporting is voluntary in the United States, contracts increasingly include clauses that require some form of sustainability reporting.
- It’s expected. If most companies in a certain sector are doing sustainability reporting, and one is not, it makes that company look less transparent and less focused on continual improvement.
- It makes companies more resilient. Sustainability reporting can evaluate conditions that might stop business as usual. Many companies assess risk through strategic planning. Sustainability reporting helps them by including social, economic, and environmental impacts in their risk assessments. By reporting against sustainability goals, organizations can demonstrate they are working on being equipped and ready to serve during a crisis.